The Texas Railroad Commission (“TRC”), an agency that has suffered financial difficulties due to budget cuts and reduced revenues, recently received a budget increase of 46 percent ($79.6 million) in the recently ended legislative session. These budgetary increases will hopefully allow the TRC to improve upon their ability to be an effective resource for landowners and make pipeline data readily available to the everyday Texan. Pipeline construction often requires pipeline companies to use the power of eminent domain to condemn property, commonly referred to as a “taking.” Public access to information collected by the TRC is vital to keeping landowners aware of activities that could affect their property.

The budget increase follows a year that saw monthly budget cuts of over a million dollars, a hiring freeze, and the postponing of desperately needed technological updates. In light of these financial difficulties, the TRC was forced to limit their operations to two core functions, the permitting and inspection of wells. Another one of the TRC’s functions is the issuance of T-4 permits which grants pipeline constructors the common carrier status required to exercise the power of eminent domain. A vital component of fulfilling this function is to maintain a public database of pipeline easements in the State of Texas.

The increased funding is intended, in part, to improve programs for well plugging, oil field clean up, and pipeline safety by financing the hiring of additional staff. The TRC’s staff is capped at 827 employees. Presently, the TRC is roughly 150 employees short of that maximum number. Additionally, the TRC was granted one-time authorization to retain nearly $40 million in revenue collected through its administration of the Natural Gas Utility Pipeline Tax. Roughly $27.6 million of that money will also be used to hire additional employees. The remainder will be used to provide salary increases.

An additional purpose of the budget increase is to continue, and hopefully expedite, the drawn-out process of updating the TRC’s computers and digitizing decades of oil and gas records which include pipelines constructed with and without the power of eminent-domain in the State.

In addition to updating its computer systems and digitizing historical records, the TRC provides an interactive map, accessible to the public, that tracks existing and operational pipelines throughout the State. The data represented by the interactive map may not always be current. This ambiguity diminishes the capacity of Texans to appreciate the scope of pipeline activity and its effect on their lives and property. One day, perhaps, the TRC will expand the functionality of its interactive map to include planned pipelines. This would allow landowners to determine whether a project under development will impact their property.

Landowners, under both the U.S. and Texas Constitutions, are entitled to just compensation when their land is taken. These database improvements can help begin to level the playing field between landowners and powerful oil and gas interests by keeping landowners current on projects that could impact their property rights.

The Texas Railroad Commission’s (RRC) new pipeline permitting rules that require oil companies to verify their common-carrier status went into effect last week, marking a significant move away from the previous rules that simply required companies to check a box to claim common-carrier status.

The RRC has maintained that its T-4 permit only allows a company to operate a pipeline and does not automatically entrust the company with the power of eminent domain. The limit of this power, the RRC says, remains with the court as it always has.

The new rules will require up-front proof of common-carrier status. Pipeline companies previously only offered proof that they carried unaffiliated third-party product if and when its common-carrier status was challenged.

This rule change comes after the landmark 2012 case in which the Texas Supreme Court ruled that a pipeline company must do more than show its T-4 permit as proof of its common-carrier status. (Texas Rice Land Partners, Ltd. v. Denbury Green-Texas, LLC, 363 S.W.3d 192 (Tex. 2012)).

If you have any questions about the new rules or anything related to eminent domain, please feel free to contact Justin Hodge (jhodge@jmehlaw.com).

Despite the drop in oil prices, the tug-of-war between landowners and the Denbury Green pipeline company continues to play out in court in the landmark case that defined common-carrier status in Texas.

Texas Rice Partners, Ltd. v. Denbury Green Pipeline, involving Denbury’s right to invoke eminent domain to obtain the properties of Texas Rice Land Partners, Ltd., a consortium of rice farmers, was ruled in the pipeline company’s favor by both the 172nd District Court and the Texas Ninth District Court of Appeals in Beaumont, Texas, in 2011. These courts claimed that Denbury was indeed a common carrier, and, therefore, could use eminent domain to obtain land to build its pipeline.

The Texas Supreme Court, however, reversed those rulings, arguing that Denbury’s classification as a common carrier rested too heavily on a pipeline company simply checking a box on a one-page document for the Texas Railroad Commission (RRC) and that the RRC’s findings could not reliably and conclusively determine a company’s power to use eminent domain.

The Supreme Court remanded the case back to the district court late 2011, and the district court again ruled in favor of Denbury’s common carrier status in 2014. The case continued again to the appellate court in Beaumont, which heard oral arguments for the case last month. Denbury built the pipeline during this legal back-and-forth, but the landowners hope the appellate court will send the case back to the Supreme Court as the case has yet to be heard by a jury and that Denbury’s intent to serve as a common carrier at the time of condemnation has not been established (Read more here).

While the court of appeals has not yet ruled on this matter, the RRC announced new regulations for granting a T-4 permit – required for property condemnation by pipeline companies – effective March 2015 in an effort to better regulate this process. The new regulations will ask for more substantial information and supporting documentation from companies applying for the permit and enforce a new timeline for the application process (Read more about the new regulations here).

As laws and precedent for private companies to invoke eminent domain continue to change, landowners should try to stay up-to-date to better protect their property rights. In fact, we all should. The laws are changing quickly, and the tug-of-war between pipeline companies and landowners will impact us all.

Justin Hodge is a law partner in Houston, Texas. He focuses on eminent domain, condemnation and landowner defense. For more information, please see http://www.jmehlaw.com.

The chairman of the Texas Railroad Commission, Barry Smitherman, spoke about the benefits of the Keystone pipeline at the energy conference hosted by the Greater Houston Partnership last weekend. In his speech, he mentioned the immense amount of profit possible from investment in the line. But who is making all the profit? Definitely not the landowner whose land is condemned so that a private company can install a hazardous pipeline for the transport of oil from tar sands in Canada. Whenever the issue of eminent domain has come up in relation to the Keystone XL pipeline or to energy expansion in general, the landowner’s rights have been swept under the rug. The best way to fight for your rights is to know them (jmehcondemnation.com). Once we know our rights, protests against condemnation will evolve into civil litigation in favor of the landowner. But to get to this point, we must understand our rights as landowners in the face of eminent domain proceedings.

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Luke Ellis and Justin Hodge are partners with Marrs Ellis & Hodge LLP. Justin heads the firm's eminent domain practice in the Houston office. Luke heads the firm's eminent domain practice in the Austin office. Luke Ellis is widely recognized as one of Texas’s top young lawyers—and one of the top lawyers of any age practicing in the area of eminent domain. Mr. Ellis has broad experience and has enjoyed success in many types of civil litigation. Justin Hodge is a trial lawyer who represents Texas landowners in condemnation, eminent-domain, and real-estate lawsuits. He represents landowners in condemnation proceedings, not the governmental authorities or private companies taking property. Mr. Hodge has handled complex condemnation and eminent-domain cases throughout the State of Texas.
If you have questions about any of the issues raised in this blog, we invite you to discuss them with us at jhodge@mehlaw.com or lellis@mehlaw.com.